It is the non-tax subsidies that add up. The US' military interest in the Middle East seems to be entirely based on the oil reserves in the region. How much less oil would be pumped with warring countries and unstable regimes? Also, oil companies largely don't pay for the environmental damage they do. If burning oil left a stinky purple gas instead of an invisible gas, they would be paying far, far more to stop it or get rid of it.
This is possibly the largest subsidy given to energy companies. Maybe the damage they do to human health is larger.
I do agree that allowing oil and gas companies to avoid paying the full costs of environmental damage is effectively a form of hidden subsidy.
Why? The US is the largest producer of natural gas in the world, and by quite a large margin[1].
Europe tied themselves to Russian natural gas, heeding no warnings in the process, and now find themselves cut off due to conflict. Oh, if only this could have been predicted and avoided in advance...
It makes sense for Europeans to experience ludicrous natural gas bills, but not someone in NY. Further, the US should not make citizens suffer in order to prop up European nations that couldn't have cared any less about their own security until it was too late.
[1] https://yearbook.enerdata.net/natural-gas/world-natural-gas-...
It's a globally traded commodity. If someone in NY won't pay 40% more, someone in Europe will. Just like you work for who gives you the most compelling offer, so too does natural gas go to who presents the most compelling offer.
> the US should not make citizens suffer in order to prop up European nations
Given that the US is where most of the natural gas is produced, per your comment, the US will realize a huge windfall by shipping its product to Europe at a high markup. The citizens of the US will be emboldened by it. They may have to pay more for heat, but stand to gain even more than that. Europe loses either way.
I have to disagree here. The citizens of the US gain nothing from the US permitting natural gas companies to export to Europe instead of filling local demand first. These are private companies anyway... so not sure how this logic holds up.
> It's a globally traded commodity.
Sure it is... however a nation can and will prohibit exports when local demand exceeds available reserves. Natural gas is a strategic asset after all, and we're already dangerously dancing with inflation/recession - it wouldn't make sense to accelerate that path just because Europe needs gas after a series of terrible, completely avoidable choices.
Sure. There is no doubt a tipping point. Seeing 100% exports wouldn't work. But the nation of the US is made up of its citizens, so only when the citizens start to feel that tipping point has nearing or has occurred will they take measures to prohibit such exports.
Clearly we're not there. There is still more upside than downside.
Majority of citizens just accept the half-truth that Putin's War caused high gas (both natural and petroleum) for everyone, and that there's nothing that can be done except end the war.
Europe needs to suffer for their poor decisions. Enough of the US swooping in and solving European mistakes... then getting villainized for being the world's safety net.
No, that isn't practical. Which is why government is set up in reverse: The citizens tell Biden what they want. The citizens are the boss, after all. It stands to reason that the message comes down from the boss. Except that isn't practical either, so middlemen are employed to combine and distill the information they receive from the boss into a more digestible form that can be presented in a practical manner to the worker.
Those middlemen are chosen by the citizens through a long and arduous process to ensure that they are trustworthy enough to accurately convey the desired message to the worker on the ground. Yes, theoretically an unscrupulous middleman could spread false information, but through hundreds of years of using this system the citizens have shown to have a strong degree of confidence in the effectiveness of the selection process.
Not only do they have confidence, but they also find utility. It would be downright silly to go to all of the trouble of selecting the most trustworthy middleman and hire him, at a decent rate of pay I might add, only to never use his services. The citizens recognize the value they get by hiring these people to pass their orders to the workers.
You personally may have no use for said middlemen as you management style sees you sit back and forever wait for Biden to knock on your door, but citizens (plural) is inherently about more than you.
Again, that's some great theory, and it's how it's supposed to work, but it doesn't. If it did, the government wouldn't be busy misdirecting reasons why the prices are ludicrous - ie, they have to sell a fake narrative to the general population, and most of the population won't question authority.
This is, in principal, why things like the electoral college exist - the framers knew the general population was busy living their own lives and either wouldn't pay enough attention or would deliberately be misled for political gain.
So while yes the government eventually answers to the people, and in theory election outcomes will be based on what people want - the problem is when the people are deliberately misled and then vote based off half-truths and lies, which is what's going on here.
High natural and petroleum gas prices are the Administration's own doing - the result of explicit domestic and foreign policy decisions the executive and team have made... but they've done a great job convincing casual voters they had nothing to do with it. That's where the way government is supposed to work starts to fall apart.
The citizens may have made a mistake in their direction for government, I can accept that. To squarely blame to workers on the ground following orders for those mistakes is strange, though. That's like blaming the developers at Google who work on chat code for the constant churn in chat applications.
Maybe those developers at Google really did tell management, rightly or wrongly, that the codebases were terrible and that Yet Another Rewrite™ was the only way out. But even if that's the case the bosses should have the wherewithal to see through what is reality and what is not, and if the claim is valid to ensure that it didn't happen in the first place.
Bosses are going to screw up, of course. No human is infallible. But they are to blame when they do. They're the boss exactly because they are in charge and responsible for seeing through the good and the bad. The worker merely serves the boss.
A rational person might say “A global pandemic and lockdown turned the supply and demand curves upside down.” and “A tyrant is holding a continent hostage by turning off fuel supplies to a major market.”, and perhaps conclude that instability, uncertainty and risk affect prices.
Or… you can listen to a windbag rant about the closure of a pipeline that doesn’t exist, and meanwhile see gasoline prices fall 30% as production imbalances improve, and still conclude that a politician chose to commit political suicide for lolz.
You shut off the gas, and the counterparty says “Ok, enjoy our new 150% tariff on software, vehicles and soy”.
On a long term scale, keeping the pumps going is good for the petroleum industry, as sustained high prices justify the capital expense for alternatives. Once you buy an electric car, you don’t really give a hoot about gasoline.
Really, you can say that the industrial revolution is defined by energy getting exponentially and artificially cheaper as we got better at digging up burnable stuff, burning it, and using the resulting energy to do stuff, including digging up more burnable stuff even faster.
As a non-user of cars, I still pay for highways. But a non-user of trains doesn't pay for railways.
Buyers of electric cars get more cash subsidy than my ebike costs to build! Why don't we give out same subsidy to people who want yo buy a bike or to spend on railway tickets?
I am a user of Cycles, and I don't get shit - I dont even get space to ride - there are almost no dedicated roads for bikes.
For the ampunt we spend on fixing roads, we could give everyone a new ebike every two years.
Airplabes are even worse. Ebikes, Cars and trains pay taxes on fuel and electricity, but airplanes don't.
So why are subsidies distributed so unfairly? At least make them equal
Everyone may use transport, and everyone may benefit from transport - but that does very little to address the extreme imbalance in transport funding we've seen in America.
1. (The Katy Freeway) https://img1.wsimg.com/isteam/ip/b856accd-c3e3-4d97-8365-327...
I think if we take a look at the world at large we'd see that the eastern seaboard and southern california could look a lot more like the Rhine valley and the lowlands while improving quality of life for residents.
Roads need to exist and I am not trying to say they don't - but they shouldn't be the primary transit option for most people on most of their routes.
While in Spain for several months it was only economical for me to take a train a single time. It was several times more expensive than the alternatives in every other case. This left me either flying or bussing.
In Stockholm it's actually cheaper to take a bus to the airport than the train, and that's just local travel.
This is such a common trope that's clearly not true. Afghanistan doesn't have any real oil production, and Iraq had a tiny OPEC quota. To the extent that oil production had any real strategic purpose in the US conflicts, it was the income they provided local regimes.
Why is the US so less concerned about South East Asia or Africa than the Middle East?
Afghanistan and Iraq II and III are just knock-on effects of all that and we're not doing because like MBS for his personality.
I’d agree that policing the Middle East is by far the biggest subsidy though, and that externalities are the thing we should be focusing on. But absent a coherent CO2 tax proposal I’m ok with chipping away at smaller subsidies where they exist (Though now seems to be a politically suicidal time to propose doing so. Wait until inflation is under control before increasing the cost of gas again.)
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This bill limits or repeals certain fossil fuel oil and gas subsidies for oil companies. Specifically, it
increases to seven years the amortization period for geological and geophysical expenditures;
repeals the tax credits for producing oil and gas from marginal wells and for enhanced oil recovery;
repeals the tax deduction for the intangible drilling and development costs of oil and gas wells;
repeals percentage depletion;
repeals the tax deduction for tertiary injectant expenses;
repeals the passive loss exception for working interests in oil and gas property;
denies the tax deduction for income attributable to domestic production activities for oil and gas activities;
prohibits the use of the last-in, first-out (LIFO) accounting method by major integrated oil companies;
limits the foreign tax credit for dual capacity taxpayers (i.e., taxpayers who are subject to a levy of a foreign country or U.S. possession and receive specific economic benefits from such country or possession);
and expands the definition of crude oil for purposes of the excise tax on petroleum and petroleum products to include any oil derived from a bitumen or bituminous mixture (tar sands), and any oil derived from kerogen-bearing sources (oil shale).
Less oil being pumped globally would be beneficial to American oil companies.
> Also, oil companies largely don't pay for the environmental damage they do. If burning oil left a stinky purple gas instead of an invisible gas, they would be paying far, far more to stop it or get rid of it.
Then tax the people burning the oil, not the ones the ones that are producing it. It's not like Middle Eastern oil burns any cleaner than domestic oil. The sad truth is that nobody in America actually gives a damn about the environment. They'll virtue signal about wanting change, but back off at any proposal that requires personal sacrifice.
The thing about those prices that would be a concern would be pushing people towards not using fuel altogether, not the existence of more expensive biofuels.
This seems like an unfair characterization of the bill. Most of the things listed are not amortization:
- repeals the tax credits for producing oil and gas from marginal wells and for enhanced oil recovery;
- repeals the tax deduction for the intangible drilling and development costs of oil and gas wells;
- repeals percentage depletion;
- repeals the tax deduction for tertiary injectant expenses;
- repeals the passive loss exception for working interests in oil and gas property;
- denies the tax deduction for income attributable to domestic production activities for oil and gas activities;
- prohibits the use of the last-in, first-out (LIFO) accounting method by major integrated oil companies;
- limits the foreign tax credit for dual capacity taxpayers (i.e., taxpayers who are subject to a levy of a foreign country or U.S. possession and receive specific economic benefits from such country or possession); and
- expands the definition of crude oil for purposes of the excise tax on petroleum and petroleum products to include any oil derived from a bitumen or bituminous mixture (tar sands), and any oil derived from kerogen-bearing sources (oil shale).Correct me if I'm wrong, but you speak as if "subsidy" were a derogatory term, a word associated to wasteful ideas that cannot be applied to something that you consider necessary. That's a highly ideological view, not an objective view of the term.
Amortization is a bookkeeping concept that most industries get to control. The government would be forcing companies here to change how they do their bookkeeping to (theoretically) extract more tax from them specifically.
In this case, the government is not currently giving them a benefit, it's taking away a right most other industries have.
Otherwise, I would have to believe that any tax rate under 100% is a subsidy.
To forestall this sort of back and forth the government has set standardized amortization schedules. It says that first year trucks decline 35% in value, second year an additional 25% and so on until it's 0.
So that's why we have standard amortization schedules. The policy implications come into play when you set those schedules. If you want businesses to buy more trucks you allow them to amortize them faster so that they are cheaper when accounting for tax implications. If you don't want them to buy more trucks you slow it down so that businesses pay more taxes sooner which makes them more expensive.
If oil companies are getting a faster than warranted amortization schedule then it is a tax subsidy.
Thought experiment: What do you think would happen if people and companies could not spread the costs of their assets out over time?
You can therefore make the argument (though I don't agree with it myself) that subsidies to big oil that reduce competition from upstarts is, in a twisted way, a climate-positive policy.
This of course fails because subsidizing big, publicly-traded oil companies reduces their cost of capital. This causes rational capital allocators to rationally invest in fossil fuel exploration, resulting in more carbon being dug out of the ground and added to the atmosphere.
A lot of them rely on oil/gas; Wind turbines, for example, are made with synthesized laminates and glues, use grease and oils to operate, and require large fleets of diesel trucks to assemble and maintain.